An exploration of company law in different countries is an interesting exercise in comparative law. In response to the idea that companies are a manifestation of culture, it is useful to note that company law in many cases reflects the differing cultural values of the jurisdictions involved. This paper will examine the question of how company law treats the issue of tortious liability for company directors in the UK, Australia, and the United States. As will be shown, that liability differs greatly across those three jurisdictions, and it appears that those differences are a manifestation of differing cultural values.
In general, laws reflect the values of the jurisdiction that has enacted them. The specific case of how company directors are treated under UK, Australian and United States law provides insights into the cultural values of those jurisdictions and demonstrates what function the company performs in those societies, what status company directors enjoy, and the degree of accountability to which company directors are held when a decision or gross malfeasance results in huge losses for the company and its shareholders.
A salient example of how a company director's behaviour can be ruinous comes from the case of AWA Ltd v Daniels, decided by the Australian Supreme Court in 1992 (1992 7 ASCR 759). AWA was a well-established Australian company involved in the manufacture, import and export of electronic components. Because the company occasionally lost money due to currency fluctuations in the course of importing and exporting, it decided to start trading on the foreign exchange market to offset losses. Accordingly AWA appointed a currency trader, who claimed after a short period that he had made substantial profits for the company. In fact the trader had been losing money, but he was able to deceive the company simply by failing to keep accurate accounting records and also because AWA never supervised his activities. Mo...